BACKGROUND: The cysteine peptidase cathepsin B is important in thyroid physiology by being involved in prohormone processing initiated in the follicle lumen and completed in endo-lysosomal compartments. However, cathepsin B has also been localized to the extrafollicular space in thyroid cancer tissue, and is therefore suggested to promote invasiveness and metastasis in thyroid carcinomas through e.g. extracellular matrix degradation. METHODS: Transport of cathepsin B in normal thyroid epithelial and carcinoma cells was investigated through immunolocalization of endogenous cathepsin B in combination with probing protease activity. Transport analyses of cathepsin B-eGFP and its active-site mutant counterpart cathepsin B-C29A-eGFP were used to test whether intrinsic sequences of a protease influence its trafficking. RESULTS: Our approach employing activity based probes, which distinguish between active and inactive cysteine proteases, demonstrated that both eGFP-tagged normal and active-site mutated cathepsin B chimeras reached the endo-lysosomal compartments of thyroid epithelial cells, thereby ruling out alterations of sorting signals by mutagenesis of the active-site cysteine. Analysis of chimeric protein trafficking further showed that GFP-tagged cathepsin B was transported to the expected compartments, i.e. endoplasmic reticulum, Golgi apparatus and endo-lysosomes of normal and thyroid carcinoma cell lines. However, the active-site mutated cathepsin B chimera was mostly retained in the endoplasmic reticulum and Golgi of KTC-1 and HTh7 cells. Hence the latter, as the least polarized of the three carcinoma cell lines analyzed, exhibited severe transport defects in that it retained chimeras in pre-endolysosomal compartments. Furthermore, secretion of endogenous cathepsin B and of other cysteine peptidases, which occurs at the apical pole of normal thyroid epithelial cells, was most prominent and occurred in a non-directed fashion in thyroid carcinoma cells. CONCLUSIONS: Transport of endogenous and eGFP-tagged active and inactive cathepsin B in the cultured thyroid carcinoma cells reflected the distribution patterns of this protease in thyroid carcinoma tissue. Hence, our studies showed that sub-cellular localization of proteolysis is a crucial step in regulation of tissue homeostasis. We conclude that any interference with protease trafficking resulting in altered regulation of proteolytic events leads to, or is a consequence of the onset and progression of thyroid cancer.